BARRY SERGEANT: I'm in conversation with Nico Schoeman, who is the chief executive officer of Simmer & Jack. Nico, your latest quarter results are out today, by the way, your year end is March 31, have you got any plan to change that to, let's say, what most mining companies go for, which is December 31?

NICO SCHOEMAN: Look, Barry, at this stage it's certainly not something that has been receiving any consideration within the company, no.

BARRY SERGEANT: Okay. You're in your second quarter of your 2011 financial year and the numbers are quite interesting to the extent that you've taken in the new acquisition, Tau Lekoa, from AngloGold Ashanti and that's only taken in for two months from August 1. So, maybe to make the numbers a little bit easier, we can look forward to what you're anticipating for the next quarter, your third quarter that's the one we're in right now. From Tau Lekoa your anticipating round about 30 000 ounces of gold and from Buffels about 21 000, is that correct?

NICO SCHOEMAN: That's 100% correct, Barry.

BARRY SERGEANT: Okay. Now, your cash operating profit for the second quarter was about R8m compared to a loss in the first quarter of about R53m. That is a significant turnaround. Do you want to talk us through that because what's happened is that the revenue has gone up 106% quarter on quarter and your total cash cost went up by 51%. So, there's a huge gap between those two percentage figures and it's had a dramatic impact on your cash profit.

NICO SCHOEMAN: Indeed, certainly we've finally seen the contribution of Tau Lekoa to the business, as you know, it was a long-awaited transaction and we saw, at least for two months of the quarter, seeing the revenue benefits coming through on that, which of course, as we always communicate to the market, we were expecting Tau Lekoa to significantly contribute to the business. Certainly that is exactly what we've seen. In the second quarter we're starting to reap the benefits of completing that acquisition.

BARRY SERGEANT: Okay and what about the proximity of the two operations, you've already started to realise some of the benefits of the combined business but what kind of impact is that going to have going forward? What are going to be more or less your net gains from the running of the two operations, from one central command?

NICO SCHOEMAN: I think there are a number of aspects to the benefits that we'll see from the joint operation. First of all, we must acknowledge that from a corporate head office point of view, we have seen a significant restructure in the last quarter, which obviously will contribute to significantly reducing the cost burden on both operations. Secondly, we're also seeing the benefits of shared management costs between the two operations. Then, of course, the sharing of the single plant by two operations and hence getting that benefit, which of course, significantly contributes to us remaining on target to achieving that R100m saving that we're targeting for the year.

BARRY SERGEANT: Right. Nico, let's go a little bit away from the actual operational cash flows and look at your financing at the moment. The payment for Tau Lekoa in round numbers that was just over half a billion rand, mostly in cash, is that correct?

NICO SCHOEMAN: Yes, it was mostly in cash, indeed, yes because it was made up of R450m that we had reserved in that guarantee account and then, of course, a part of that a shortfall, as you know, we settled through the issue of a share issue...

BARRY SERGEANT: Yes.

NICO SCHOEMAN: ...which was to the amount of about R32m, yes.

BARRY SERGEANT: That's taken some strain on the balance sheet. If you go to year end, which is March 31 this year, the debt, current and also longer term was just over R200m. That's gone up to round about, just over half a billion rand at September 30. How do you plan to deal with that? You did have, you had a forward sale on Friday last week of USD20m but how do you anticipate tackling that half a billion rand worth of debt?

NICO SCHOEMAN: Look, of course that Deutsche Bank deal that we've concluded contributes significantly to reducing the cost burden that was associated with the RMB debt, where we have to deliver that 2030 ounces into the gold loan for Deutsche. Beyond that we are confident that going forward in the third and fourth quarter, we will see that the operations will start contributing positively towards the business and we remain confident that we can service the debt. Then of course, there's also the option that in terms of the debt, servicing of the debt, comes the deadline of June, July of next year on the ABSA notes that there's an opportunity, if the need arises, to also be able roll that debt, which will again, at the time, quite significantly reduce the burden associated with that.

BARRY SERGEANT: Okay, so, in the meantime, if I understand you correctly, you're fairly relaxed about dealing with the debt burden going forward?

NICO SCHOEMAN: Yes, certainly. We certainly believe that in terms of the way that we're structured now, we feel comfortable that the debt burden can be serviced.

BARRY SERGEANT: Okay and Nico, just looking at a couple of legacy issues, there were substantial management and also directory changes earlier on this year, pretty much in conjunction with your associate company, First Uranium, has Simmers, at this stage, settled down under the new management and board of directors?

NICO SCHOEMAN: Yes, most definitely. I think one of the obvious contentious issues at the time was our relationship with our BEE shoulder, Vulisango. We are obviously quite happy to report that since the re-institution of the board in February of this year, we've seen a significant contribution from that part of the business. Then beyond that, of course, having a very strong board, we see, particularly from members that are prominent in the mining industry. We do see active participation in ensuring that we achieve our turnaround plans.

BARRY SERGEANT: Okay, are you looking into any particular deals that occurred in the past, for example, on the debt side, you've got a pretty substantial amount owing to Aberdeen, are you taking any kind of careful look at that and other issues that were part of the prior management setup?

NICO SCHOEMAN: Look, of course, that certainly in respect of the Aberdeen issue that is, of course, a transaction, which at this stage is exposed to the legal process. In time to come that will run its course but certainly keeping a very close handle on that.

BARRY SERGEANT: Yes and there's some other issues in the past that could also, depending on how they resolve, could be of benefit to Simmers. Nico, looking specifically at your relationship, which is vastly improved, with First Uranium, Simmers is currently holding about 34%, you are holding some convertible paper in First Uranium as well and that could increase the Simmers stake in First Uranium to about 48%. The two companies were split in 2007, First Uranium was spun out of Simmers and there's been a very large question, I don't know how far back it goes, as to whether or not the two companies may or may not, once again, merge. At this stage, there seems to be fairly strong reason for why that should occur. Is that something, which is going to be decided at the board level or is it something, which is being at the executive level where you sit?

NICO SCHOEMAN: First of all, one must say that both from a Simmers as well as a First Uranium point of view and that is an approach that has been shared by both Deon and myself is that at the moment it's of critical importance that there's a management focus on ensuring that we can get our businesses to contribute to free cash flow. So that's certainly most important at this stage. Then, of course, apart from that just ensuring that we maximise the [benefit? 3:13] from our current asset base. That includes things like organic growth through the Weltevreden project, capitalising on the North West Block project. Then, of course, in terms of growing the business and looking at further strategic growth, certainly it's something that's between ourselves and FIU. We continue to consider the merger benefits.

BARRY SERGEANT: Yes because certainly from, if you take an annualised gold production out of Simmers, running at these sorts of rates, you're talking about

200 000 ounces odd a year and the way that First Uranium is going at the moment, gold production is going to be well over 100 000 ounces and of course, you've got the oncoming uranium production. So, in terms of the, let's say, tier two global gold producers, a combined entity would fit very neatly into that kind of category. So, I guess, that's a matter of wait and see while the two companies in the meantime focus very much on operational issues.

NICO SCHOEMAN: Definitely Barry that is certainly the approach and I think it's also important that just in terms of our share price performance, it's important that we start delivering into our promises and start building confidence with our investor base.

BARRY SERGEANT: Good, okay, well Nico, thanks very much indeed. That was Nico Schoeman, chief executive officer of Simmer & Jack.

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